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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
DEBRA K. CHILLAS, LORI A. IN THE SUPERIOR COURT
MCNAUGHTON AND MICHELE S. ACHEY OF PENNSYLVANIA
Appellees
v.
MICHAEL B. REEDY
Appellant No. 548 MDA 2019
Appeal from the Order Entered March 13, 2019
In the Court of Common Pleas of Lebanon County
Civil Division at No: 2015-01290
BEFORE: STABILE, J., McLAUGHLIN, J., and MUSMANNO, J.
DISSENTING MEMORANDUM STATEMENT BY STABILE, J.:
FILED OCTOBER 15, 2020
The trial court and the Majority have concluded that a Lease (the
“Lease”), originally executed between Michael Reedy (“Appellant”), and the
parties’ deceased parents (“Decedents”), governing the use of property at
4601 Stiegel Pike, Newmanstown Pennsylvania (the “Property”), is
procedurally and substantively unconscionable. They reach this conclusion
despite the fact the agreement reflects precisely what the parties to it desired,
because Appellees, not parties to the agreement, do not like its terms. I find
this result to be without precedent. Here, because Appellees, Debra K. Chillas,
Lori A. McNaughton, and Michele S. Achey, were not parties to the Lease, and
because they were entitled to disclaim their interest in the 2010 Trust (the
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“Trust”)1 by which they succeeded to Decedents’ interest in the Property as
governed by the Lease, I would reverse the order granting Appellee’s request
for declaratory relief.
As nonparties to the Lease, Appellees had standing to sue thereunder
only if they could establish that they were third party beneficiaries.
In order for a third party beneficiary to have standing to
recover on a contract, both contracting parties must have
expressed an intention that the third party be a beneficiary, and
that intention must have affirmatively appeared in the contract
itself. Furthermore […] to be a third party beneficiary entitled to
recover on a contract it is not enough that it be intended by one
of the parties to the contract and the third person that the latter
should be a beneficiary, but both parties to the contract must
so intend and must indicate that intention in the contract; in other
words, a promisor cannot be held liable to an alleged beneficiary
of a contract unless the latter was within his contemplation at the
time the contract was entered into and such liability was
intentionally assumed by him in his undertaking.
PA Energy Vision, LLC v. S. Avis Realty, Inc., 120 A.3d 1008, 1015 (Pa.
Super. 2015) (emphasis in original), appeal denied, 138 A.3d 6 (Pa. 2016).
Appellees never claimed to be third-party beneficiaries under the Lease, and
any such claim would have failed under the foregoing standard, as there was
no indication in the Lease that Appellant and Decedents intended Appellees to
be third party beneficiaries under the Lease. Appellees’ interest in the
Property arises out of the terms of the Trust under which they were to gain
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1 The Majority’s memorandum thoroughly and accurately sets forth the terms
of the Trust and Lease.
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ownership interests in the Property upon death of both Decedents. The terms
of the Trust are not at issue here.
Likewise, the doctrine of unconscionability focuses on the parties2 to
an agreement: “[a] determination of unconscionability requires a two-fold
determination: 1) that the contractual terms are unreasonably favorable to
the drafter, and 2) that there is no meaningful choice on the part of the other
party regarding the acceptance of the provisions.” MacPherson v. Magee
Mem'l Hosp. for Convalescence, 128 A.3d 1209, 1221 (Pa. Super. 2015)
(en banc), appeal denied, 161 A.3d 789 (Pa. 2016), cert. dismissed, 138
S.Ct. 354 (2017). Because a finding of unconscionability will obtain only
where the complaining party lacked meaningful choice as to acceptance of the
objectionable terms, it is clear that unconscionability is measured as of the
execution of the contract. Restatement (Second) of Contracts § 208 (1981).
See also, Parilla v. IAP Worldwide Services VI Inc., 368 F.3d 269 (3rd.
Cir. 2004) (a contract or term is unconscionable at the time the contract is
made).
Appellant and Decedents, the original parties to the Lease, agreed upon
its terms. The terms of the Lease were not unusual, and merely reflect
Decedent’s desire for the farming of the Property to continue. Appellant was
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2 See, e.g. Pagosa Oil and Gas, L.L.C. v. Marrs and Smith P’ship, 323
S.W.3d 203, 212 (Tex. Ct. App. 2010) (a non-party to a contract had no
standing to challenge it as unconscionable).
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willing to undertake the farming of the Property, and Decedents performed
their obligations under the Lease without incident or dispute until their
passing, at which point Appellees succeeded to Decedents’ position as
landlords under the Lease. I have found no law supporting the proposition
that a person not originally a party to a contract has standing to void the
contract as unconscionable. Nor did the Majority or the trial court cite any.
Moreover, I have found no supporting law for the trial court’s conclusion that
Appellees as future landlords were entitled to claim they had no meaningful
choice as to the terms of the Lease Agreement when it was negotiated
between Decedents and Appellant. Trial Court Opinion, 3/13/19 p. 19.
Embracing such a proposition would create an untenable obligation upon a
trust’s settlors to consult with and secure agreement with all intended
beneficiaries before creating and executing a trust agreement. The law does
not so provide.
Furthermore, even if Appellees could claim the Lease is unconscionable,
an unconscionability challenge would necessarily fail. There is no suggestion
the terms of the Lease were unreasonably favorable to Decedents as the Lease
drafters. To the contrary, both the trial court and Appellees persuasively
argue that the Lease terms favor Appellant as the tenant. The claim would
fail on this basis alone. The claim also would fail as both the Decedents and
Appellant had a meaningful choice. The Lease was negotiated at arms-length
and provided precisely what each party desired. Decedents were willing to
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enter into a lease agreement with Appellant with certain financial incentives,
so long as he agreed to continue to farm the Property.
To the extent Appellees can claim they had no meaningful choice in
succeeding as landlords to the Property and to assuming the Lease obligations,
this argument fails as well. If they did not wish to succeed to Decedents’
interest in the Property they could have disclaimed any such interest. The
right of disclaimer is governed by statute:
A person to whom an interest in property would have
devolved by whatever means, including a beneficiary under a will,
an appointee under the exercise of a power of appointment, a
person entitled to take by intestacy, a joint tenant with right of
survivorship, a donee of an inter vivos transfer, a donee under a
third-party beneficiary contract (including beneficiaries of life
insurance and annuity policies and pension, profit-sharing and
other employee benefit plans), and a person entitled to a
disclaimed interest, may disclaim it in whole or in part by a written
disclaimer which shall:
(1) describe the interest disclaimed;
(2) declare the disclaimer and extent thereof; and
(3) be signed by the disclaimant.
The right to disclaim shall exist notwithstanding any
limitation on the interest in the nature of a spendthrift provision
or similar restriction.
20 Pa.C.S.A. § 6201.
Instead of disclaiming, Appellees have accepted their succession in
interest to the Property and have attempted to defeat Decedents’ intent by
having the Lease declared unconscionable. I do not believe the law permits
this result. As stated, to hold otherwise, as the Majority does, is to impose
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upon a trust settlor a duty to investigate at the time of trust formation whether
potential successors under a trust instrument are satisfied with the terms of
their potential future interests. Or, upon failing to do so, risk that successors
in interest can defeat the settlor’s intent in forming the trust. Appellees do
not contend that Appellant engaged in any wrongdoing, nor do they contend
that Decedents were unable to understand their rights and obligations under
the Lease.3
Decedents, during their lifetime, were free to plan for the succession of
the Property within the bounds of the law, and they were under no obligation
to leave anything to Appellees. Appellees, if dissatisfied with the terms of
their succession in interest to the Property and Lease, were free to disclaim
those interests. This is not a Hobson’s choice. Rather, it is the choice faced
by anyone who stands to receive a testamentary gift. If the intended recipient
deems the gift advantageous, they may accept it on the testator’s terms; if
not, they may disclaim it. Mere dissatisfaction with the testamentary scheme
is not grounds for rewriting it.
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3 The trial court concludes under its substantive unconscionability analysis that
the Lease fails for lack of further consideration from Appellant to the landlord.
Trial Court Opinion 3/17/19 p. 24. I respectfully take issue with this
conclusion as well, since the quid pro quo under the Lease was Appellant’s
continuing promise to farm the property in exchange for financial incentives.
Moreover, the Lease provides that the parties were "intending to be legally
bound[.]" Under the Uniform Written Obligations Act, an agreement is not
rendered unenforceable in the absence of consideration when this statement
is made a part of the contract. See Act of May 13, 1927, P.L. 985, No. 475,
§ 1, 33 P.S. § 6.
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Appellees received benefits under the Trust and Lease, including
$65,000.00 each and an ownership interest in the Property as tenants in
common with each other and Appellant. Likewise, the Lease imposed certain
obligations upon Appellees, including payment of taxes and extraordinary
repairs. If Appellees deemed these rights and obligations more burdensome
than beneficial, they were under no legal obligation to accept them. Because
Appellees accepted, I would hold that they are bound by the Lease.
For the foregoing reasons, I would conclude the trial court erred in
declaring the Lease unconscionable.
I respectfully dissent.
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